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A new survey by the accountancy firm KPMG indicates that institutional investors in Canada are becoming increasingly interested in cryptocurrency.
A considerable rise from 31% in KPMG’s 2021 survey, the report shows that nearly 40% of institutional investors in the nation reported having direct or indirect exposure to crypto assets in 2023.
The spike in cryptocurrency adoption among institutional investors in Canada highlights an increasing interest in alternative asset classes and an awareness of the mature crypto sector.
Diversification And Hedging Drive Crypto Exposure
Two primary considerations drive institutional investors’ greater exposure to cryptocurrency assets: diversity and dependable value storage. Kunal Bhasin is a partner and leader in KPMG Canada’s Digital Assets department. This pattern coincides with the US experiencing growing debt and inflation.
These investors want to protect themselves from future devaluation and explore alternative investment opportunities, so they dedicate a portion of their portfolio to cryptocurrency assets.
According to the poll, 10% or more of institutional investors’ portfolios now contain cryptocurrency assets, up from 5% in 2021. It even emphasizes how much the investing world is beginning to want digital assets.
Maturing Market and Improved Custody Infrastructure
Most investors gave two main justifications for investing in digital assets: an expanding cryptocurrency market and better custody infrastructure.
According to Kareem Sadek, an executive with KPMG’s Digital Assets group, the legalization of spot Ethereum and Bitcoin exchange-traded funds (ETFs) in Canada in February 2021 significantly drew local investors to the asset class.
Moreover, the recent introduction of spot Bitcoin ETFs in the US was a “milestone moment” for many Canadian market players, adding to the industry’s confidence.
Diverse Exposure and Growing Client Demand
The report revealed that institutional investors in Canada are gaining exposure to crypto assets through various avenues.
Half the surveyed investors reported exposure through Canadian ETFs, close-ended trusts, or other regulated products. Meanwhile, 58% gained exposure through the stock market, such as Galaxy Digital on the Toronto Stock Exchange – up from 36% in 2021.
Moreover, institutional investors are reporting exposure to cryptocurrencies through derivatives markets at a rate of 42% in 2021 compared to just 14% in 2021.
However, the exposure of venture capital or hedge fund firms decreased somewhat, going from 29% in 2021 to 25% in 2022.
The poll also showed that financial organizations’ expansion into the digital asset area was driven mainly by rising client demand for services related to crypto assets.
Conclusion
The KPMG poll clearly shows Canada’s growing institutional interest in cryptocurrency.
Institutional investors are seeing the potential of digital assets as a tool for diversification and as a hedge against economic uncertainty as the cryptocurrency market grows and custodial solutions advance.
The trend toward mainstream adoption is accelerating, with roughly 40% of Canadian institutional investors currently exposed to crypto assets and a third committing a sizable portion of their portfolios to this asset class.
Nonetheless, the industry’s capacity to satisfy the changing demands of institutional investors, a robust infrastructure, and clear regulations are likely necessary for its further expansion and success.
Amanda Shinoy is one of the few women in the space invested knee-deep in crypto. An advocate for increasing the presence of women in crypto, she is known for her accurate technical analysis and price prediction of cryptocurrencies. Readers are often waiting for her opinion about the next rally. She is a finance expert with an MBA in finance. Quitting a corporate job at a leading financial institution, she now engages herself full-time into financial education for the general public.
